February 5, 2013
Compare/Contrast Soy Production in Argentina and Mato GrossoDuring the third week of January, a group of technicians from the Mato Grosso Institute of Agricultural Economics (Imea) and the Agriculture and Livestock Federation of Mato Grosso (Famato) toured the principal soybean producing provinces of Argentina including Buenos Aires, Santa Fe, Cordoba, and Entry Rios and observed the following differences between soybean production in Argentina and Mato Grosso.
Land ownership vs. land rentals
- Approximately 60% of the soybean production in Argentina is on rented land and the rents are generally renegotiated every year. Large soybean producers in Argentina enter into rental agreements with dozens of different landowners every year.
- In Mato Grosso, nearly all the soybeans are produced on land owned by the farmers themselves. Renting land for soybean production is becoming a little more common in Brazil, but it is still a very small fraction of the total production.
Production practices and the cost of production
- In Argentina a lot of the production practices such as planting, spraying, and harvesting is done by contractors.
- In Brazil not much of the work is contracted out except for some spraying and harvesting.
- The soils in Argentina are very fertile and as a result, farmers do not use much fertilizer for soybean production with the exception of maybe a little phosphorous.
- The soils in Mato Grosso are not nearly as fertile and they must apply phosphorus and potassium on a yearly basis and reapply agricultural limestone every 3-4 years.
- In Argentina 15% to 25% of the soybeans are double cropped after wheat or barley.
- In Mato Grosso, it is corn that is double cropped after the soybeans are harvested. In southern Brazil, soybeans are double cropped after the winter wheat is harvested.
- The cost of soybean production in Argentina is in the range of US$ 300 to US$ 500 per hectare.
- The cost of soybean production in Mato Grosso is US$ 1,000 per hectare or higher.
Logistics and storage
- Most of the principal soybean producing regions of Argentina are within 400 kilometers of the ports and there are excellent highways leading to the ports. The cost of transporting soybeans in Argentina is very low compared to Brazil and the U.S.
- Soybean production in Mato Grosso can be 1,500 to 2,000 kilometers from the ports in southern Brazil and 60% of the soybeans are transported by truck over poorly maintained highways.
- The cost of transporting soybeans from Mato Grosso can be as high as 17% to 22% of the costs of the soybeans.
- Argentine farmers make heavy use of silo bags to store their soybean production on-farm.
- The use of silo bags in Brazil is still relatively new but it is becoming more common especially for storing safrinha corn.
- The Argentine government intervenes regularly in the grain markets by restricting wheat and corn exports in order to hold down domestic food prices and inflation.
- There are extremely high export taxes in Argentina with soybeans being the highest at 35%. Argentine producers must pay an additional tax of 35% which is similar to income taxes.
- Export taxes on meal and oil are less than on soybeans, thus giving a financial incentive to process the soybeans.
- Argentina has a crushing capacity of 48 million tons and the current crop is estimated at 50-52 million tons. Eighty percent or more of Argentina's soybeans will be processed and then the meal and the oil will be exported.
- In Brazil, domestic tax policies actually provide a disincentive to processing the soybeans. Therefore, most of Brazil'as soybean exports are in the form of grain and not meal or oil.
- Argentine farmers detest President Kirchner and her policies.
- Brazilian farmers do not like recent government policies concerning environmental regulations, truck driver regulation, and the lack of investments in logistics and infrastructure. They feel the government could do much more to help farmers, but they do not detest the government like the farmers do in Argentina.
- Many farmers in Argentina sell their crops at harvest or shortly after harvest. Thus far, they have forward contracted only about 15% of their anticipated 2012/13 production. This slow rate of forward contracting may be the result of recent weather concerns or the fear of rising inflation and/or the possibility of currency devaluation. Whatever the cause, they feel more comfortable holding onto a larger percentage of their production.
- In Mato Grosso, as much as 70% of the anticipated production has been forward sold. Inflation in Brazil is not a significant concern, at least not yet, and certainly there is no chance of currency devaluation in Brazil.